LBHI’s Third Wave of Claims Against Lenders and Brokers May be Starting

For several years, Lehman Brother’s Holdings, Inc.’s (“LBHI”) has been stating it has RMBS Trust Claims that could be forthcoming against the mortgage industry. RMBS Trustees filed claims in LBHI’s bankruptcy, not unlike the Fannie Mae and Freddie Mac claims, in 2009. When pressed for information, the position has always been that they may never materialize as the liability has yet to be established. However, this week, LBHI filed a Motion for Approval of a Compromise (“Motion”) which specifically asks the Bankruptcy Court to approve the “RMBS Settlement Agreement.” In the motion, it represents that the initial demand filed in LBHI’s bankruptcy was for 37 billion in claims. The motion further states that the universe of loans has been established by a “protocol” and that the Trustees have provided the LBHI Plan Administrator with the loan files along with the evidentiary support for their claims. After much litigation since 2009, the clams purportedly total approximately 16.7 billion. LBHI and the Trustees have agreed to reserve 2.4 billion and, at this point, the parties agree that the non-final settlement number for the claims is 2.416 billion. However, the next step is for the Court to conduct an estimation proceeding to determine the final amount of the allowed claim. The estimation proceeding is to take place by October 17, 2017.

LBHI is serving this motion on numerous entities, which it is important for you to look out for. In short, if you receive a notice of settlement, it is important to keep in mind that such may very well carry legal consequences if you then fail to respond in a timely fashion.  As this could be the beginning of an entirely new wave of lawsuits in the New York Bankruptcy Court, which wave may even dwarf the litigation that LBHI has been advancing in connection with its GSE related claims, it is again extremely important that you act promptly if you receive any related notice.  As AMLG has represented well over sixty (60) lenders and brokers in connection with LBHI’s GSE related claims, please feel free to contact Tracy Henderson in the event you have any questions and/or concerns related to LBHI.